Real estate investment trust HCP Inc. (NYSE: HCP) has announced that its CEO Lauralee Martin has left her executive role and the company’s board, effective July 11, 2016. The REIT’s executive chairman Michael D. McKee has assumed the role of interim president and CEO.
The REIT’s second CEO shakeup in three years comes after the Irvine, California-based company announced in May it was making major changes to its portfolio by spinning off its skilling nursing assets into a separate, publicly-traded REIT. HCP’s share prices have suffered compared to its major competitors, Ventas Inc. (NYSE: VTR) and Welltower Inc. (HCN).
“With the completion of our strategic portfolio review in May and the resulting spin-off transaction that is well underway, the board felt now is the appropriate time to advance the process of developing HCP’s next generation of leadership,” McKee stated. “We have made substantial progress towards rebuilding our executive team to align with our strategic vision for the future, and identifying our next CEO represents the cornerstone of that effort.”
‘Not a surprise’
At the same time as the spin-off was announced, HCP made several changes to its executive leadership, promoting Justin Hutchens to CIO and bringing on Kai Hsaio as executive vice president of senior housing management. Both Hutchens and Hsiao previously served as CEOs for major senior living companies—Hutchens for REIT National Health Investors (NYSE: NHI) and Hsiao for independent living giant Holiday Retirement.
Having a “successor or two” for each of the key positions in HCP’s leadership has been an interest of the board, McKee said at the time, fueling some speculation over a potential replacement for Martin down the line.
“[Martin] leaving is not a surprise, I don’t think, to anyone,” Omotayo Tejumade Okusanya, an analyst with Jefferies LLC, told Senior Housing News. “People have always looked at the hiring of Justin Hutchens as the first sign that there was going to be a new management team there.”
Plans to replace Martin had become much clearer in the past six months or so when HCP’s board of directors became more involved in the company on a day-to-day basis, Okusanya said.
McKee has been HCP’s executive chairman since May 2016 and has served as independent chairman and lead director prior to that role.
“Our portfolio performance and business outlook are consistent with our plan across all investment sectors, and the spin-off of our HCR ManorCare portfolio remains on track to be completed later this year,” McKee said in a statement.
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HCP’s board of directors will initiate the process of appointing a permanent CEO. The process is expected to take between three and six months.
“On behalf of the board and the company, I want to express our sincere gratitude to Lauralee for her many contributions to HCP, both as a member of our board since 2008 and during the last three years as CEO,” HCP’s Lead Independent Director David B. Henry said. “Lauralee’s energy, passion and dedication to HCP are much appreciated by all of us, and we wish her the very best in the years ahead.”
Under a separation agreement, Martin will receive a salary continuation of $6 million over the next 24 months, according to public documents filed with the Securities and Exchange Commission (SEC). A portion of her restricted stock units (RSUs) will vest with her departure, and other portions of her performance-based RSUs may vest over time, subject to certain conditions.
‘A good sunset’
All things considered, Martin left HCP on a good note, having completed the mission she set out to accomplish: stabilizing the management team, Okusanya said.
“It’s a good sunset for Lauralee,” Okusanya said. She more or less inherited the ManorCare portfolio from prior HCP leadership, and she was able to “resolve” that problem, he said.
“It’s not a bad way to go, after solving one of the biggest problems the company has had,” Okusanya concluded.
Martin assumed the role of HCP CEO in October 2013, after the board decided a change in leadership style was required and removed then-Chairman, President and CEO Jay Flaherty III.
HCP had not immediately responded to a request for comment from Senior Housing News as of press time.
Written by Amy Baxter